Rumor of the day....
U.S. stocks sharply lower as war optimism eases
March 24, 2003 12:03:00 PM ET
(Updates to late morning)
By Haitham Haddadin
NEW YORK, March 24 (Reuters) - Stocks were pinned sharply lower by late morning on Monday, ending the previous week's big rally as investors mulled their previous optimism about the U.S.-led war on Iraq.
"I found the market way too optimistic about the quick and surgical nature of operations and it's coming to the realization that we are going to have a difficult and costly conflict," said James Luke, portfolio manager for BB&T Asset Management. "There is also stuff in the background with the economy being weak but the real driver is the Iraq war news."
Over the weekend, U.S.-led forces suffered their heaviest casualties so far, with stiff resistance from Iraqi soldiers at several towns as the push toward Baghdad continued.
Iraqi television footage of American prisoners of war gave pause to investors whose bets on a lightning-fast U.S. victory had sent the blue-chip Dow to a hefty 13 percent rise in an eight-day rally.
The tech-laced Nasdaq Composite Index sank 42.45 points, or 2.99 percent, to 1,379.39. The blue-chip Dow Jones industrials fell 271.15 points, or 3.18 percent, to 8,250.82 and the broad Standard and Poor's 500 index was off 27.70 points, or 3.09 percent, at 868.09.
On Friday, the Dow jumped 2.84 percent, the S&P rose 2.29 percent and Nasdaq added 1.31 percent, with the Dow logging its best week in more than 20 years, as investors found hope for a swift end to the Iraq war in a firestorm of missiles and bombs raining on Baghdad.
"We suspect many thought the war could have ended over the weekend," independent strategist Philip Erlanger said in Monday's issue of his newsletter. "Instead, the war news showed how costly war is in terms of human life."
No economic reports were slated for release on Monday, leaving investors to focus on the Middle East battle zone.
President Saddam Hussein said on Monday the invaders sent to topple him were trapped in Iraq after five days of war, but the U.S. commander of the invasion, General Tommy Franks, described Iraqi resistance as "sporadic" and said his forces were closing in fast on Baghdad.
More bombs shook Baghdad before and after Saddam's defiant tribute to his fighters. Shortly after he spoke, Iraq said it had shot down two U.S. Apache helicopters. Franks said two crewmen of a U.S. Apache Longbow helicopter shot down south of Baghdad were missing.
ALTRIA DOWN
Among individual issues, Dow stock Altria Group (MO) sank $1.75 to $33.29, or 5 percent. The decline came after an Illinois judge ruled Altria unit Philip Morris USA was liable in deceiving smokers into thinking "light" cigarettes were safer than regular cigarettes and ordered the top U.S. tobacco company to pay $10.1 billion in damages.
The sharp decline in Altria dented other stocks in the same sector, and sent the S&P Tobacco index <.GSPTOBA> tumbling about 5 percent. UST Inc. (UST) lost 89 cents, or 3 percent, to $28.02 and RJR Tobacco Holdings (RJR) fell $1.61, or 4.4 percent, to $34.89.
Wal-Mart Stores Inc. (WMT) fell $1.62, or 3 percent, to $53.05, pressuring the Dow. Wal-Mart said it still expects to meet its forecast for March sales at stores open at least a year, despite the "CNN effect" last week when potential shoppers were glued to televisions to watch coverage of the war with Iraq.
El Paso Corp. (EP) fell 34 cents to $5.79, or 5.5 percent, in active trade on the New York Stock Exchange. Standard & Poor's Ratings Services said late on Friday the outlook remains negative for the natural gas pipeline operator, which has about $18 billion of on-balance sheet debt.
Northwest Airlines Corp. (NWAC) fell 88 cents, or 10.6 percent, to $7.42. Northwest Airlines has said it was cutting 4,900 jobs -- about 11 percent of its work force -- and its flight schedule by 12 percent because of lower travel demand due to military action in Iraq, following similar actions by a number of other airlines.
Humana Inc. (HUM) lost 30 cents, or 3 percent, to $9.74. The managed health care company said on Friday it would take $30.7 million in pretax charges in the first quarter of 2003. REUTERS
AI
